Late payment charges to be capped at £12 following Office of Fair Trading investigation

The Office of Fair Trading has ruled that card companies should only be able to charge a maximum fee of £12 for late payment of credit card bills.

The OFT believes the current charges for late payment, which are typically between £20 and £25, are excessive and unfair. In future customers should only be charged for the actual administration cost of processing late payments, such as postage and stationery.

It also ruled that penalty charges are illegal, as they breach the 1999 Unfair Terms in Consumer Contracts Regulations. A statement from the OFT said "Credit card default charges have generally been set at a significantly higher level than is legally fair ".

The OFT said its ruling on charges would collectively save consumers a minimum of £300m.

The credit card industry has until 31st May to respond to the statement, after which the OFT says it will begin legal proceedings to enforce the £12 cap.